Saturday, June 1, 2013

We seem to be hearing more and more these days
about corporate welfare: what companies are getting what, who's paying for it,
and who is benefiting. Unfortunately, very few are benefiting and those that
are rake in millions. What exactly does corporate welfare do to our country?

To start off, corporate welfare comes from our
taxpayer dollars to help big business in our country. It comes in the form of
tax breaks, tax holidays, and government subsidies. Corporations are supposed
to be taxed at a flat rate of 35% in United States. These companies should be a
great source of revenue for our country but they are increasingly becoming a
huge cost to taxpayers.

A recent article titled "Corporate
Welfare Queens" in the National Review stated that
"this marriage of Big Government and Big Business carries a price tag of
$50 billion each year" (26). The article goes on to say that post-9/11 the
federal government allocated $500 million to entice corporations affected by
the disaster to remain in lower Manhattan. American Express got $25
million of this payout and then announced that they were planning to stay in Manhattan anyway
– they'd already been there 150 years. Spokesman for American Express Tony
Mitchell was quoted as saying: "Once those financial incentives became
available, we chose to participate" (28).

Wal-Mart, the world's largest retailer, is the
poster child for why corporate welfare is ridiculous.Wal-Mart is one of the largest recipients of
government subsidies, grants, and other public funds. According to an article
by Jenna Wright, 90% of Wal-Mart's distribution centers have been subsidized by
federal and local governments. These subsidies are estimated to total $1
billion dollars and change. Wright gave an example of the Wal-Mart in Sharon Springs, New
York which made a deal with an industrial development agency so it could
evade property taxes. This deal will save the Sharon Springs Wal-Mart $46 million
dollars over the lifetime of that particular agreement.

Why would Wal-Mart even need these types of
deals? They are the largest corporation in the world and the largest private
employer in the United States and Mexico. In 2006 alone, the company
made a net income of $12.178 billion dollars. Why are we giving them money?
Surely, they can afford to cover their own business costs. Sadly, government
subsidies and evading taxes are not the only ways Wal-Mart chooses to bypass
their responsibilities.

Wal-Mart has become notorious for trying to
cheat their employees on hours, wages, and healthcare. Wal-Mart pays its
employees at or close to poverty level – which is just under $15,000 per year.
Only 41-46% of Wal-Mart employees can afford the healthcare coverage provided.
Other large firms have approximately 67% of their workers using their
healthcare program.

"Instead of
providing affordable health insurance, Wal-Mart encourages its employees to
sign up for publicly funded programs, dodging its healthcare costs, and passing
them off to taxpayers" says Jenna Wright (2).

This is a multi-billion dollar problem for taxpayers here in the United
States. In California alone, providing government healthcare to
Wal-Mart employees costs taxpayers an estimated $32 million dollars a year.

Due to media attention, the practices of Wal-Mart might not be
such a big surprise. What might come as a shock is what is referred to as a
"tax holiday". According to a New
York Times article:

"The United
States' corporate tax policy gives companies a strong incentive to move their
profits to low-tax havens, such as Ireland and Luxembourg. Once
there, the profits are allowed to grow untaxed by the United States until
they are repatriated."

In early 2005, our government gave American companies a
tax-holiday which allowed them to repatriate foreign profits back to the U.S. and
taxed those profits at a rate of 5.25% instead of the required 35%. An
estimated $100-500 billion dollars found its way back to the U.S. Johnson &
Johnson repatriated $11 billion, Hewlett-Packard had $14.5 billion, and the
drug company Pfizer had a whopping $29 billion eligible for repatriation.

Lou Dobbs, in his book War on the
Middle Class, said that "fifty years ago, corporate income taxes made
up a third of all federal revenues; now corporations account for just an
eighth" (30). Dobbs also points out that these same companies that go
abroad to save their profits from U.S. taxes come back and ask our
government for federal contracts. He quotes Congresswoman Rosa DeLauro of Connecticut,
an opponent of this practice, as saying "It's about 1.4 billion in
contracts. And we lose about $5 billion in revenue every single year"
(32). We are, in effect, paying these companies to not pay taxes.

Why is the federal government allowing this to
happen? Congress' excuse for the 2005 tax holiday was that it would unleash
money that would create new jobs. The New York Times pointed out corporations
would likely use this extra money to buy other companies which would more
likely lead to layoffs – not new jobs. The Multinational Monitor pointed out
another rationale for awarding contracts while cutting taxes for rich companies
is that the competitive marketplace is more efficient than government –
"but now half of the contracts are awarded without a competitive,
open-bidding process".

The corporations aren't the only ones to blame
for this widespread misuse of government funds. Robert Pear and Michael
Janofsky, writing for the New York Times, reported that:

"Tucked inside
the Medicare bill is an assortment of provisions that have nothing to do with
providing drug benefits to the elderly…big bills become larded with whatever
bait it takes to get a majority to vote. A lot of money in the Medicare bill is
spent on things that have nothing to do with a prescription benefit."

Incumbents use these bills for pet projects that help them get
re-elected. The American taxpayers, eager to complain about paying taxes, must
not be paying attention to what their money is being spent on. These
corporations, with the help of Congress and other governmental agencies, are
not paying their fair share – not even close.

So who's left holding the bag? The middle
class who accounts for more than half of the United States' taxes is left
holding the bag. Pensions are underfunded by $450 billion according to author
Alan Greenblatt. Minimum-wage earners have lost 17 percent of their purchasing
power to inflation since the last increase which was in 1997. Jobs are being
shipped overseas by American companies looking for cheap labor. Meanwhile,
executive compensation has tripled and our wealthiest citizens (and companies)
are getting tax cuts – even free handouts.